Panel Backs Scrapping World Bank Business Climate Rankings

An independent panel Monday officially recommended the World Bank scrap controversial country rankings based on the business climates in 185 economies around the world. But opposition from the bank’s largest voting member, the U.S., will likely mean the annual rankings in the “Doing Business” report will remain unscathed for now.

Washington-appointed World Bank President Jim Yong Kim indicated earlier this month that although the development institution might tweak how its methodology, it isn’t going to discard the rankings altogether.

Mr. Kim named the panel late last year after coming under pressure from China and other disgruntled emerging markets pushing to eliminate the report.

But after reviewing a preliminary review from the panel that backed axing the rankings, Mr. Kim defended them as important to the report’s success. “It is indisputable that Doing Business has been an important catalyst in driving reforms around the world,” he said in a statement in early June.

The bank declined to comment further Monday.

China last year was listed behind Kazakhstan, Tunisia, Ghana and 87 other countries in the bank’s “Doing Business” report. The rankings of 185 economies are based on 10 indicators, such as the permitting process, access to electricity, protecting investors, paying taxes, enforcing contracts and resolving failed firms.

The 11-person panel questioned the validity and reliability of the Doing Business report, saying it can be misinterpreted and relies on a narrow data set.

While the U.S. acknowledged that the report could be improved, Washington sees the rankings as an important benchmarking tool that “promotes policy reforms to unlock the potential of the private sector to create jobs,” said U.S. Treasury spokeswoman Holly Shulman.

Scott Morris, a visiting fellow at the Center for Global Development and former senior U.S. Treasury official, said the U.S. was concerned that eliminating the rankings “would a step backwards in terms of having a credible and independent voice on policy matters.”

Mr. Morris said that while the panel’s review pointed to methodological failures of the Doing Business report, it didn’t recognize its effectiveness in prompting changes in governments’ policies around the world.

“As much as they don’t want to admit it, beauty contests matter in policy-making,” he said. Whether it’s about getting attention globally or trying to leverage reforms within a country, “you need the simplicity of something like these rankings,” Mr. Morris said.

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